This is my current eqemu_config.xml file config (I changed 127.0.0.1 to localhost like suggested before and I tried changing it back to 127.0.0.1 before submitting this reply to make sure. I also tried changing the eq user/pass to root/pass but It was the same).
<!-- Database configuration, replaces db.ini. Defaults shown -->
<database>
<host>localhost</host>
<port>3306</port>
<username>eq</username>
<password>eq</password>
<db>eq</db>
</database>
<qsdatabase>
<host>localhost</host>
<port>3306</port>
<username>eq</username>
<password>eq</password>
<db>eq</db>
</qsdatabase>